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It is because porter’s five forces can give the managers in the corporate to analyse the current situation of their industry in a structured and understand easily way (Porter 2001). Based on the strategic management view, it is good for managers of any organization in the similar industry or sectors to understand the five competitive forces acting and between organizations in the similar industry or sector.
Secondly, this model can used to compare the impact of competitive forces on their own organization with the impact on their competitors. Competitors may have the different options to react towards the changes in competitive forces from their different resources and competences (Porter 2001). This may influence the structure of the whole industry (Porter 2001).
Besides that, Porter five forces also can helps the employers for their corporate planning strategies like provide the statistical analysis (Johnson et al 2009). Many firms and their competitors are taken into account by using this framework and therefore the analysis that conducted by them by using this framework was getting a good deal of the information on the activities that take place in the market (Johnson et al 2009). As a result, the analysis can provides an idea about the attractiveness of that industry and the way in which the individual organizations would choose for compete (Johnson et al 2009) as well as profitability of the business which like analyses a company is whether can or can’t make a decent profit and also identify the ultimate profit potential of an industry (Porter 2001) and also helps the firms to decide either to enter or exit from a particular industry (Johnson et al 2009) and also the firms whether can be positioning and its abilities to provide the best defence against the existing array of competitive forces (porter five forces (nd).
Also, it give the firms different choices from which they can know that which force is at their favor and which is not and after that they can create a strategy which give them more advantage in having a competitive position in the market (Johnson et al 2009).
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In addition, it provides the firms a dynamical analysis to identify the changes that might take place in the future and they also could see the external environment and the five forces together and after that they can get the direction on what would be change in the competitive forces (Johnson et al 2009).
Furthermore, it also helps the firms know that how the different competitors affected by these forces (Johnson et al 2009). It means that how the bargaining power of suppliers, bargaining power of buyers, threat of new entrants and threat of substitutes would influence the different competitor’s compete in that particular similar industry and according to different size industry. All the firms among the industry are different and they affected differently (Johnson et al 2009). Some of the firms are large size and capital while some of the firms are small or medium and therefore their industry structures are not the same (Johnson et al 2009). For instance, in banking industry, there are retail banks, corporate banks and western unions. The affect could uncover by conducting the industrial analysis and therefore the firms could have the strategies to continue exist in the market (Johnson et al 2009).
Next, it can gain the insight into the forces at the work in the business environment of a strategic business unit which need the particular attention in the development of strategy because strategic choices need to take the account of the external environment especially paying attention on Porter's Five Forces in which the organization operates like competitive advantage may be corrosion as substitute products because of the technology changes or as new competitors enter market (Porter 2001). For example, a leading manufacturer of the vacuum tube with a strong position in the electronic product industry and it unthreatened by the potential entrants will gain the low returns if it competes with the silicon chip or new semiconductor (Porter 2001). In such condition, the way to compete with the substitute product becomes the first strategic for the leading manufacturer of vacuum tube to maintain competitive advantage (Porter 2001).
Finally, it helps the strategic managers a shared understanding of the threats and opportunities to make the firm to gain competitive advantage (Porter 2001). A strong competitive force can be regarded as a threat because it depresses profits while the weak competitive force can be viewed as an opportunity for organizations to earn great profits (Porter 2001). It gives us the awareness and thinks about the strategy to face and fight them when we face the strong competitive force and capture the opportunity to have a gain and the advantages from the weak competitive forces. However, the strength of the five forces may change from time to a time because of the factors beyond a company's direct control (Porter 2001). Like this conditions, it is crucial managers to recognize the opportunities and threats when they arise and formulate the appropriate strategy to change the strength of one or more of the five forces to its advantage and (Porter 2001).